The holiday season brings calm upon Wall Street. Many mergers and acquisitions are put on the back burner until the New Year, and the volume of shares traded drops significantly. But Santa isn't the only person who has been busy this week, as a couple of major deals were announced and many year-end numbers became available. (Miss last week's news update? Catch up with Water Cooler Finance: FBI Insider-Trading Bust.)
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Canada's Toronto Dominion Bank made a move to become one of the biggest automotive lenders in America, and year-end statistics pointed to Goldman Sachs as the M&A leader among financial institutions. Apple made the news again, but it wasn't positive press, as an Apple insider was charged with illegally profiting from privileged information. Harvard Business School announced its plan to invest in entrepreneurs, while the U.S. Senate approved a grant to assist green energy industries. (Start the year off right by evaluating your financial health and setting new goals. Check out Financial New Year's Resolutions You Can Keep.)
TD Buys Dominion over Chrysler Financing
Canada's second largest bank acquired Chrysler Financial Corp. for $6.3 billion. The deal makes Toronto Dominion a top-five U.S. auto lender and strengthens its position among the top-10 banks. Canadian banks were relatively unharmed by the economic slump and TD is using that advantage to gain leverage in the American market. While the purchase price seems relatively cheap, some analysts are struggling to see the value in buying into Chrysler's floundering operations.
Barclays Capital analyst John Aiken explains, "We are having trouble understanding where the loan volume growth will come from and how TD will be able to jump-start Chrysler Financial to generate exceptionally large loan growth after effectively being dormant for well over two years." Despite the skeptics, TD's stock rose 3.5% shortly after the announcement. (From internet banking to credit unions, it's in your power to cut fees and maximize service. See Choose To Beat The Bank.)
Goldman Sachs Leads the M&A Rankings
According to Dealogic rankings, Goldman Sachs is set to take the crown as the top mergers and acquisition maker of 2010. With 33 deals totaling approximately $564 billion, Sachs narrowly edged out its nearest competitor, Morgan Stanley. At 338 M&As, Morgan Stanley made a few more deals than Sachs, but the deals were valued at $561.9 billion. While the figures are preliminary, it's unlikely that Morgan Stanley can whip up another $2.1 billion in deals with only a few days left in the year. Other notable members in terms of M&A rankings were Credit Suisse, JPMorgan and Bank of America Merrill Lynch.
One Bad Apple
The recent illegal trading investigation by the Federal Bureau of Investigation and Securities Exchange Commission revealed some shady dealings by Flextronics International Ltd.'s former senior director, Walter Shimoon. Flextronics produces parts for many of Apple's devices and this partnership allowed Shimoon special access to Apple's highly-secretive product developments. Shimoon allegedly was paid $22,000 to reveal Apple's sales forecasts and information about future products. In one of the leaked quotes regarding the iPhone 4, Shimoon reveals, "They are telling their core suppliers to plan for six million a month."
Making matters worse, Shimoon hypocritically warned his Flextronic colleagues by saying, "I am sending this e-mail as a gentle reminder to all of us that [the Flextronics business unit] and Apple are covered under both NDA [non-disclosure agreement] and MDSA [Master Development and Supply Agreement]. This ... will protect the work we have done with them up until now as well as the joint work we are doing with Apple ... on process improvements for the N90 [next-generation iPhone] program." This publicized contradiction will make his defense a tough sell in the courts.
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Harvard Invests in Startups
Harvard Business School has created a $50,000 fund to assist student startup projects. The initiative hopes to give a head start to the next great business idea. With a lack of financing defeating so many promising ideas, Harvard has taken a step towards removing this barrier and encouraging its students to think big. Dan Rumennik, the student who proposed the fund, explains, "This [lack of funding] is the greatest challenge for people with an idea but no money. It also encourages students to start businesses while in school and to connect with more of their peers who want to do so as well."
Considering that former Harvard student, Mark Zuckerberg created Facebook without the benefit of the University's funding, it should be interesting to see what innovations come from Harvard's new entrepreneurial support system. (Many people want to start a business, but not everyone has what it takes to succeed. To learn more, refer to Are You An Entrepreneur?)
Green Energy Grants
While the recent battle over U.S. taxes revolved mostly around the Bush-era tax cuts, green energy industries had a lot riding on Congress' decision. The outcome turned out to be great news for those in the wind and solar energy industries, as the new Treasury Grant Program will provide federal aid to promote these sectors. The news comes as a surprise to those working in these fledging energy sources, as most anticipated an end to federal assistance this year. American Wind Energy Association head, Denise Bode called the move "a great holiday present for the 85,000 American workers in the wind energy industry, tens of thousands of whom will now be able to get back to work.''
The Bottom Line
As Wall Street sets to get ready for the new year, a few companies held off on their Christmas shopping to give the financial world something to talk about. Much of the news is promising for the New Year, as the aforementioned funds and grants will give Americans a better chance at a financially stable 2011. And while Apple suffered a spate of bad publicity, the news isn't likely to lessen the number of Apple gadgets that made it under North America's Christmas trees.
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